Behavioral Finance: Overcoming Your Natural Instincts to Outsmart Your Lizard Brain

Traditional economic theory teaches that humans will make rational decisions when presented with all the facts and appropriate alternatives. Research shows, however, that in many instances investors make irrational decisions driven by our prehistoric “lizard brain.” These are the reactions developed over many years to promote survival and include common responses such as “fight or flight” and the “herd mentality.” Understanding these tendencies is the critical first step to counteracting genetically ingrained—and potentially destructive—investment behavior.